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VIDEOWhen Will the Market Accept the Reality of the Recovery?
By
Mike Mish Shedlock
Feb 25, 2010 1:30 pm
The economy needs jobs and an increase in consumer spending -- neither of which is coming.
Yesterday the market rallied the moment Federal Reserve Chairman Ben Bernanke started yapping to Congress about holding interest rates low for a considerable length of time. Pray tell, what did he say that anyone shouldn't have expected?Perhaps today the reality of why Bernanke feels compelled to hold rates low will set in. Following news that unemployment claims spiked to 496,000, the S&P 500 gapped down 15 points. Is there more where that comes from?
With that backdrop, let's take a look at the Unemployment Weekly Claims Report for February 25, 2010.
In the week ending February 20, the advance figure for seasonally adjusted initial claims was 496,000, an increase of 22,000 from the previous week's revised figure of 474,000. The four-week moving average was 473,750, an increase of 6,000 from the previous week's revised average of 467,750.
Weekly Unemployment Claims
In reference to February 6, last week I said "After last week's unexpected huge dip, this week sports an unexpected huge rise. That's why it's best to focus on the trend in the four-week moving average."
Today I suggest that perhaps that February 6 "green shoot" is an outlier. It's the only thing keeping that four-week moving average as low as it is.
Four-Week Moving Average of Initial Claims
Four-Week Moving Average of Initial Claims Detail
The four-week moving average of claims for the last three weeks is above where it was on December 12, 2009, and just slightly better than it was on December 5, 2009. By this measure, the recovery has stalled.
Is Bad News Finally Bad News?
The day is still early. Bad-news buyers may still save the day.
At some point however, reality will eventually set in. Without jobs, all this happy talk about the impending recovery and all of Bernanke's yapping about low rates won't satisfy the market. It's going to take both jobs and an increase in consumer spending to lift the economy.
From where I sit, neither is coming.
If you share Mish's viewpoint, be sure to read Slowly Implementing a Short Side Strategy by Ron Coby & Denny Lamson. For ETF trades and strategy take a FREE 14 day trial to our Grail ETF & Equity Investor newsletter written by Ron & Denny. Learn more.
No positions in stocks mentioned.
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